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During due diligence, counsel for a prospective acquiror identifies an IP license agreement in which the target company has granted a counterparty a license under “all patents in the Licensed Field owned by target or any of its Affiliates.” The license agreement includes a common definition of “Affiliate”—i.e., any entity controlling, controlled by or under common control with target—that expressly includes all entities who qualify as an “Affiliate” on or after the effective date of the license agreement. Buyer’s counsel realizes that after the contemplated transaction closes, buyer and its affiliated companies will be target’s “Affiliates,” such that buyer’s and its affiliates’ patents in the Licensed Field may be subject to the target’s license grant. Because of this “poison pill,” buyer immediately puts the potential transaction on hold to evaluate the risk of proceeding.

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